The Transition from Underpricing Residential Electricity in Bangladesh : Fiscal and Distributional Impacts
The electricity sector in Bangladesh has been facing unprecedented challenges, with severe capacity constraints and sector subsidies that quadrupled from 0.2 percent to 0.8 percent of gross domestic product (GDP) between 2010 and 2012, driving the...
| Main Authors: | , , |
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| Format: | Policy Note |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2013/01/17647682/transition-underpricing-residential-electricity-bangladesh-fiscal-distributional-impacts http://hdl.handle.net/10986/18362 |
| Summary: | The electricity sector in Bangladesh has
been facing unprecedented challenges, with severe capacity
constraints and sector subsidies that quadrupled from 0.2
percent to 0.8 percent of gross domestic product (GDP)
between 2010 and 2012, driving the government's fiscal
deficit deeper. This policy note examines the poverty and
distribution impact of one such reform-residential
electricity tariff increases-along with their fiscal
implications. A challenge of such adjustments is how to
minimize their impact on the poor and vulnerable. Using
household survey data, this report studies the
distributional and fiscal implications of the residential
tariff adjustments between March 2010 and March 2012 on to
inform policy dialogue on the provision and targeting of
electricity subsidies. Electricity subsidies are defined as
the difference between the cost of supplying a unit of
electricity and the tariff the end-user is charged for a
given unit. Between 2010 and 2012, real cost of supply
increased almost 20 percent. This policy note focuses on
just one part of a much broader and complex system of
connected energy policies. The policy implications of this
analysis should only be considered in light of this broader
context. In particular, this note does not study in detail
the complex issues of generation and operational efficiency
(in transmission and distribution). Second, this note does
not study the political economy of tariff and subsidy
reform. Tariff increases have been a source of social
unrest, and planned increases could generate additional
unrest. It will be important for the government to consider
the political economy of further reform carefully. Moving
forward, both of the new slab systems being discussed could
relieve the fiscal burden of subsidies. |
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